Chair’s Power to Adjourn Meeting
What power does the chairman of the board have to adjourn a general meeting because of a disputed shareholding? A recent ruling clarifies the approach of the court in relation to the chair’s power at common law to adjourn the meeting of their own accord.
What’s the background?
The directors called a shareholders’ meeting for the purpose of appointing two new directors.
One of the proposed directors (H) said he owned half of the company’s share capital having been previously involved in the business, but the company rejected this. The chairman told him he was not entitled to either attend or vote at the meeting.
In the event, both H and his lawyer attended the meeting and the chair asked them both to leave.
They refused to do so, therefore, the chairman told the meeting it could not go ahead and he was adjourning it. However, a proxy then purported to re-open the meeting arguing that the chair did not have the power to adjourn it.
The proxy and H, together with another shareholder, then passed shareholder resolutions appointing H and the other proposed director to the board and a new chairman was appointed.
The original chairman asked the court for an interim injunction to restrain the two new directors from acting or holding themselves out as directors. The application was granted.
He argued that he had adjourned the meeting before the resolutions to appoint the ‘new’ directors were passed, therefore, the resolutions were invalid. He also successfully argued that he could adjourn the meeting as chairman using his residual power to do so if it was not possible to ascertain the views of the meeting.
The court found that, as a matter of law, it was sufficiently arguable that a chairman does have a general power to adjourn if it is impossible to discover the views of the meeting. A dispute in relation to whether or not an individual holds a ‘determinative’ vote satisfies this condition.
Here, if H did hold the shareholding as he so claimed, it would have given him a determinative vote so the chair could not continue the meeting and ignore his purported vote. Nor was it open to him as chair to use his casting vote to defeat the resolutions appointing the two individuals as directors.
However, it is important to note that the ruling is not determinative on this issue – the court simply allowed the injunction on the basis that this was a serious issue to be tried.
What does this mean?
The ruling provides useful clarification of the chairman’s power to adjourn a general meeting of his own accord if the view of the meeting cannot be validly determined. This includes where there is a dispute in relation to the ownership of a determinative shareholding.
As always, take expert legal advice if there is any doubt as to the legality of adjourning a meeting because disputes can cost a business significant amounts of money to resolve. There could yet be a ruling in future on this issue.
1Findmyclaims.com Limited v Howe [2018] EWHC 1833 (unreported)
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